John O'Boyle/The Star-LedgerLt. Gov. Kim Guadagno, right, testifies before the Senate budget committee at the Statehouse in Trenton Monday. Looking on is Assistant Secretary of State Kathy Kisko.

TRENTON — It is usually one of the more staid events in Trenton: a senate budget committee hearing.

And the subject is usually one of the more boring: funding for the arts.

But not this time. Fireworks broke out and confusion reigned.

Lt. Gov. Kim Guadagno sparred with lawmakers on her supervision of the State Arts Council Monday, which she contended was basically an out-of-control agency. She said it grants contracts improperly, suggested fraud on the part of arts council staff, and repeatedly asked lawmakers to help her change the law that created the council to give her office more direct authority over their dealings.

Senators Linda Greenstein (D-Mercer) and Barbara Buono (D-Middlesex) said they thought Guadagno already has control of the council and asked why she was complaining that she can’t get a grip on an agency that is part of her department. Guadagno’s duties include acting as the Secretary of State, which includes the art council among the agencies it oversees.

There was shouting, cross, exasperated looks and lots of interrupting.

"I can’t hire or fire these people; I can’t review their contracts," Guadagno said, adding that she disciplined members of her own staff for their role in the troubled contracts.

"It sounds like chaos reigns at the Department of State," Buono said after the session ended.

The questions arose from testimony Guadagno gave April 12 before the Assembly budget committee, when she described the arts council as a rogue agency that answers to no state official or department regarding its activities.

She told lawmakers about a routine audit by the Office of Legislative Services that had uncovered contracts worth more than $250,000 that were not properly documented and did not follow state procurement procedures. A third, for $50,000, was discovered upon further review, she said.

The contracts were for public art commissions associated with state construction projects, including the 9/11 Memorial currently under construction in Liberty State Park in Jersey City. Guadagno said her office has no oversight over the arts council’s deals.

But a Star-Ledger report published Sunday found that members of the Department of State staff actually signed off on the contracts, and that Guadagno’s chief financial officer, Eric Anderson, sent a memo to all the department’s agencies, including the arts council, outlining the protocols and stating that all requests for "fiscal actions" must be submitted to his office "for review and processing."

Guadagno told the senators that the problems were so serious that OLS had requested a criminal investigation, and her office turned the matter over the attorney general. A spokesman for the attorney general said he could not comment on any potential investigation.

Greenstein was the first to question Guadagno, who opened the hearing with a 20 minute presentation about her department’s accomplishments. Greenstein asked Guadagno to confirm that Anderson signed the purchase orders that released the money to Co-Works, the Hamilton-based firm that served as the manager for the public art projects. She asked whether his signature represented a de facto approval.

Guadagno did not know, but said if he did, his signature did not constitute a substantive review.

Sen. Buono asked Guadagno why she would discipline her employees if they had no responsibility, as Guadagno claimed.

"For not following internal treasury guidelines," Guadagno replied. "Processes were not followed."

Sarlo suggested the committee return to the topic once the final audit was released.

"Hopefully, we’ll get to the bottom of it when the audit is public," he said.